As lawmakers hammer out a single
insurance reform bill, they are deeply divided over how to revamp
Citizens Property Insurance and provide substantial rate relief to
its policyholders.

Article Courtesy of The Miami Herald

By BEATRICE
E. GARCIA
Published January 19, 2007

TALLAHASSEE
- Providing substantial rate
relief for policyholders of the state-run insurer is the thorniest issue
left for lawmakers as they scramble to hammer out a final insurance reform
bill.

But there's little time to investigate and
debate some very complex plans.

Between today and Monday afternoon when the
week-long special session ends, they must reconcile almost-opposite
approaches to Citizens Property Insurance.

The stakes are huge. The House and Senate
have passed a package of bills that offer options for homeowners to lower
their insurance premiums -- from strengthening their homes to selecting
less coverage. While legislative leaders believe differences on those and
other consumer-related issues can be resolved, the differences that divide
them on Citizens could become a deal-breaker.

''I won't agree to something that doesn't
allow some changes at Citizens,'' said Sen. Bill Posey, a Rockledge
Republican and chairman of the Senate Banking and Insurance Committee.
"It's probably one of the most important things we can do for
lowering rates.''

Both Senate and House plans for Citizens
start out in the same place: eliminate a proposed 56-percent rate hike, do
away with a 25 percent hike that was to kick in Jan. 1, freeze rates at
2006 levels for one year, and no longer require the insurer to charge the
highest rates in the state.

Although these measures would provide real
relief, rates could remain at unaffordable levels for some Citizens
policyholders.

Gov. Charlie Crist repeated his call for
significant rate reductions Thursday, which he now says must be at least
25 percent across the board, including for Citizens -- with more than
459,000 policyholders in South Florida and nearly 1.3 million throughout
the state.

''The idea and reason for being here is to
reduce rates, and we have said it over and over again,'' said the governor
after a cabinet meeting.

Senate leaders believe Citizens needs to
change to realize future rate reductions for its policyholders. They
propose allowing the insurer to expand so it could write other more
profitable lines of insurance, such as fire, theft and liability on homes.

SPREADING RISK

Citizens officials champion this idea
because, they say, it would allow the insurer to collect more premiums and
spread risk over a larger pool of policyholders.

Such a plan, Citizens has said in the past
week, could mean a near 20-percent rate drop on windstorm insurance for
Citizens policyholders in South Florida. But the rate savings would work
out only for homeowners who choose to have all their home coverage under
Citizens.

The governor is amendable to the idea.

''I think the more we make Citizens
competitive, the more we give them an opportunity to have lower rates and
not be the insurer of last resort as it has been and have the highest
rates,'' said Crist.

House leaders, though not opposed to an
eventual restructuring of Citizens, don't go that far now.

The House proposals offer some management
changes, such as removing the board of governors, and some operational
changes, such as allowing premiums to be paid in installments and setting
up a task force to review outstanding claims and suggest ways to resolve
them -- all meant to make life somewhat easier for Citizens policyholders.

But the House would prefer to defer making
broader changes at Citizens until the regular session when there's more
time to study such a complex, and possibly risky, venture.

Under the Senate plan, Citizens would be
taking on more risk. If there's a massive storm in the next couple of
years and the insurer hasn't raised enough reserves, any rate savings for
policyholders -- with any insurer -- could be wiped out by assessments.

After waiting out its year with frozen
rates, the insurer would most likely have to file for rate increases to
start kicking in January of 2008 that would bring rates back to
actuarially sound levels, required by law. This could be done over a
period of time.

''We have been saying all along that the
expansion of Citizens may have merit or may not have merit, but [that's]
impossible to determine because we have such limited time,'' House Speaker
Marco Rubio, a Coral Gables Republican, said late Thursday.

STRONG VOICE

A strong voice in the Citizens debate could
turn out to be Alex Sink, the state's newly elected chief financial
officer.

She, too, would like more time to study the
ramifications and impact of expanding Citizens' operations, though she
said the idea "has merit.''

Sink is urging lawmakers to ask Citizens to
draw up a business plan before the start of the Legislature's regular
session.

''Show us your numbers. Show us how [you]
would operate under this new environment,'' said Sink. "Just like any
new business, we should see if they can handle the business.''

Writing a complete homeowners policy that
includes windstorm coverage as well as fire, theft and liability wouldn't
be entirely new for Citizens. It already provides those coverages for more
than 738,000 homes in the state, including 110,000 policies in the
high-risk coastal areas.

To be sure, both House and Senate leaders
want Citizens policyholders to enjoy a rate cut, possibly along the same
lines that could be achieved from another proposal that helps out the
policyholders of private insurance companies.

Depending on which plan is finally
approved, there could be savings on the windstorm portion of home
insurance if private companies take advantage of buying lower cost
reinsurance from an expanded catastrophe fund.

But even the governor may be increasingly
resigned to the shortage of time to study ways to change Citizens.

''I don't think it needs to be done in the
next five days, but it needs to be done soon,'' Crist said.

Rep. Ellyn Bogdanoff, a Fort Lauderdale
Republican and a key negotiator on the Citizens' piece of the House plan,
said that the bills may fall short of meeting the governor's goal.

''You have the governor saying that he
wants 25 percent, across the board, and my assumption is he means that for
Citizens, too,'' she said. "We would have to do more than what we
currently have on the table to accomplish that goal.''

Said
Crist: "Let's face facts. We're in the insurance business now . . .
so we're already here, why not make it a company that can compete? I hope
the private insurance companies aren't afraid of competition.''